Abbott’s comeback plan: why reintroduced drugs could boost future earnings?

Abbott Laboratories (Pakistan) Ltd, (ABOT) one of the country’s top multinational pharmaceutical players, is taking a bold step to reintroduce several previously discontinued products. This strategic revival comes amid a wave of regulatory changes that could significantly reshape profitability for the pharma sector, and Abbott appears to be positioning itself at the forefront of this opportunity.

The reintroduction strategy: what’s driving it?

Between 2022 and 2023, Abbott pulled some of its drugs off the shelves. Rising cost pressures, limited pricing flexibility due to regulatory caps, and exchange rate volatility made it financially unviable to keep those products in circulation. However, a recent shift in policy has opened the door for a comeback.

Thanks to the deregulation of non-essential medicines and hardship price approvals for essential ones, Abbott is now empowered to price its reintroduced products more in line with market dynamics. This could translate into stronger gross margins and a healthier bottom line.

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Why it matters for investors?

1. Deregulation Advantage: With roughly 70% of Abbott’s product portfolio falling into the non-essential category, the company is ideally positioned to benefit from pricing freedom. This regulatory easing allows for quicker adaptation to raw material costs and inflation, providing more predictable margins.
2. Proven Brand Equity: Abbott’s flagship products like Surbex-Z, Brufen, and Arinac dominate their respective therapeutic segments. Reintroducing known brands under improved financial conditions can fast-track market penetration and volume recovery.
3. Topline Growth Rebound: Despite a slight 1.7% YoY decline in volumes during CY24, Abbott managed a 23% increase in revenue, largely due to a weighted average price hike of 29% YoY. The reintroduction of discontinued products should help balance the volume side of the equation.
4. Margins on the Mend: Abbott’s gross margins rebounded from 21% in CY23 to 29% in CY24, signaling resilience and effective cost management. Reintroduced products will likely operate under this improved margin regime.
5. Valuation Upside: Currently trading at a forward P/E of 12x for CY25, the stock appears undervalued compared to historical sector multiples. Optimus Research gives it an “Outperform” rating with a fair value target of PKR 1,307/share, offering a 36% upside from current levels.

Outlook

Abbott’s move to bring back discontinued products isn’t just a nostalgic marketing play, it’s a calculated decision grounded in new economic and regulatory realities. For long-term investors, this signals both operational confidence and a potentially lucrative phase in the company’s growth cycle.

With stable exchange rates, deregulation tailwinds, and a robust product lineup, Abbott is poised not just to recover lost ground but to push ahead with renewed vigor.

Source: Optimus Capital Management Research

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⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →